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CA Final · Financial Reporting · Ind AS 27 Separate Financial Statements

Narmada Ltd carries its 80% investment in Tapi Ltd, a subsidiary, at cost of ₹50 crore in its separate financial statements. On 31 March 2026 the board commits to a plan to sell the investment and it meets the criteria to be classified as held for sale under Ind AS 105. Fair value less costs to sell is ₹58 crore. How is the investment accounted for in the separate financial statements?

The investment is accounted for under Ind AS 105 and measured at the lower of carrying amount and fair value less costs to sell. That is ₹50 crore, so no gain of ₹8 crore is recognised, and it is presented as held for sale.

  1. AContinue at cost of ₹50 crore, since Ind AS 27 overrides Ind AS 105
  2. BAccount under Ind AS 105 at lower of carrying amount and fair value less costs to sell, i.e. ₹50 croreCorrect
  3. CRemeasure to ₹58 crore and recognise ₹8 crore gain in profit or loss
  4. DRemeasure to ₹58 crore and recognise ₹8 crore in other comprehensive income

Explanation

Investments accounted for at cost are accounted for under Ind AS 105 when classified as held for sale. Ind AS 105 measures at the lower of carrying amount (₹50 crore) and fair value less costs to sell (₹58 crore), so ₹50 crore, and gains above carrying amount are not recognised. Continuing without applying Ind AS 105 is wrong.

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